Rocky Brands, Inc. saw fourth quarter net sales increase 1.7 percent to $128.1 million, compared with $126.0 million in the fourth quarter of 2023, or up 8.8 percent after excluding certain non-recurring sales in the fourth quarter of 2023 following the change to a distributor model in Canada and temporarily elevated commercial military footwear sales to a single customer.

  • Wholesale segment sales for the fourth quarter decreased 5.2 percent to $81.3 million from $85.8 million for the same period in 2023. Excluding the non-recurring sales in the fourth quarter of 2023, Wholesale segment sales increased 4.5 percent compared to the year-ago period.
  • Retail segment sales for the fourth quarter increased 15.3 percent to $43.6 million from $37.8 million for the Q4 period in 2023. Excluding the non-recurring sales in the fourth quarter of 2023 relating to the change to a distributor model in Canada, Retail net sales increased 16.3 percent compared to the prior-year period.
  • Contract Manufacturing segment sales increased 39.1 percent to $3.2 million in 2024, compared to $2.3 million in the fourth quarter of 2023. The increase in Contract Manufacturing sales was said to be due to a new contract with the U.S. Military that was awarded in late 2023.

Income Statement Summary
Gross margin in the fourth quarter was $53.2 million, or 41.5 percent of net sales, compared to $50.7 million, or 40.3 percent of net sales, for the 2023 Q4 period. The 120 basis-point increase in gross margin was attributable to an increase in Wholesale gross margin as well as a higher mix of Retail segment sales, which carry higher gross margins than the Wholesale and Contract Manufacturing segments.

Operating expenses were $44.7 million, or 34.9 percent of net sales, for the fourth quarter, compared to $36.0 million, or 28.6 percent of net sales, for the prior-year Q4 period. Excluding $4.7 million of expense related to trademark impairment and acquisition-related amortization costs in the fourth quarter of 2024 and $0.8 million of acquisition-related amortization costs and costs related to the closure of a manufacturing facility in the fourth quarter of 2023, adjusted operating expenses were $40.0 million and $35.2 million for the fourth quarter of 2024 and 2023, respectively. The increase in operating expenses was reportedly driven by higher logistics costs associated with the increase in Retail sales, as well as higher marketing spend, incentive compensation and other discretionary spending due to the pullback in spending in the year ago period.

As a percentage of net sales, Adjusted operating expenses were 31.2 percent in the fourth quarter 2024 compared with 27.9 percent in the prior-year period.

The company completed its annual impairment testing of goodwill and other indefinite-lived intangible assets. As a result of the testing, the company incurred a total non-cash charge of $4.0 million related to the impairment of trademarks for The Original Muck Boot Company brand.

Income from operations for the fourth quarter of 2024 was $8.5 million, or 6.6 percent of net sales, compared to $14.7 million, or 11.7 percent of net sales for the 2023 Q4 period. Adjusted income from operations for the fourth quarter was $13.2 million, or 10.3 percent of net sales, compared to Adjusted income from operations of $15.5 million, or 12.3 percent of net sales, for the 2023 Q4 period.

Interest expense for the fourth quarter of 2024 was $3.0 million compared with $5.3 million a year ago. The decrease compared to the year-ago period was driven by lower interest rates as a result of the debt refinancing completed in April 2024 as well as lower debt levels.

The company reported fourth quarter 2024 net income of $4.8 million, or 64 cents per diluted share, compared to net income of $6.7 million, or 91 cents per diluted share, in the fourth quarter of 2023. Adjusted net income for the fourth quarter of 2024 was $8.9 million, or $1.19 per diluted share, compared to adjusted net income of $7.3 million, or 98 cents per diluted share, in the fourth quarter of 2023.

Full Year 2024 Overview

  • Net sales decreased 1.7 percent to $453.8 million versus the prior year.
  • Gross margin increased 70 basis points to 39.4 percent of net sales compared to 38.7 percent of net sales in the prior year.
  • Income from operations was $31.1 million compared to $35.4 million in the year-ago period.
  • Net income was $11.4 million, or $1.52 per diluted share in 2024, compared to $10.4 million, or $1.41 in 2023.
  • Adjusted net income was $19.0 million, or $2.54 per diluted share compared to $14.3 million, or $1.93 per diluted share in 2023.
  • Total debt on December 31, 2024 decreased $44.4 million or 25.7 percent year-over-year to $128.7 million.

“Our sales trends accelerated as the holiday season progressed led by strong consumer demand for our Durango and Xtratuf brands, with particular strength in our direct to consumer channel which fueled our highest ever sales quarter for our Retail reporting segment,” said Jason Brooks, chairman, president and CEO, Rocky Brands, Inc. “We are pleased with our finish to the year, which included recurring Wholesale sales returning to growth and retail sales increasing over 15 percent for the fourth quarter. Increased marketing helped fuel our top-line performance as we brought spending back in-line with historical levels after under investing in demand creation in the year ago period. Our fourth quarter momentum has carried into early 2025, providing us with a good start to the year. While the macroeconomic environment remains uncertain, we are cautiously optimistic about our near-term prospects and confident that the substantial reduction in our debt provides us with the financial flexibility to invest in growth and deliver enhanced earnings and greater value for our shareholders.”

Balance Sheet Review
Cash and cash equivalents were $3.7 million at year-end, compared to $4.5 million on December 31, 2023.

Total debt, net of unamortized debt issuance cost of $2.3 million, on December 31, 2024 was $128.7 million, consisting of $35.1 million term loan and $95.9 million of borrowings under the company’s senior secured asset-backed credit facility. Compared with December 31, 2023, and September 30, 2024, total debt on December 31, 2024, was down 25.7 percent and 14.4 percent, respectively.

Inventory at year-end was $166.7 million, compared to $169.2 million on December 31, 2023. Compared with December 31, 2023, and September 30, 2024, inventories on December 31, 2024, were down 1.5 percent and 3.0 percent, respectively.

Image courtesy Xtratuf/Rocky Brands, Inc.